
Korea Zinc shareholders queue to enter the extraordinary shareholders’ assembly venue at Grand Hyatt Seoul, Jan. 23. Joint Press Corps
The battleground for management of Korea Zinc has shifted from a shareholders‘ assembly to the courts, as Chairman Choi Yun-beom faces an injunction request made by the alliance of personal fairness agency MBK Companions and Younger Poong to droop the validity of the resolutions handed on the extraordinary shareholders‘ assembly on Jan. 23.
Forward of the shareholders’ assembly, Choi swiftly established a cross-shareholding construction throughout the firm to defend his management, successfully excluding Younger Poong from exercising its voting rights in the course of the assembly.
Consideration is now on whether or not Choi’s actions have been illegal, with the court docket’s ruling anticipated to have a decisive influence on the continued energy battle throughout the world’s largest zinc smelter.
On Friday, the MBK alliance filed an injunction request with the Seoul Central District Courtroom to droop the validity of the resolutions handed on the shareholders’ assembly, together with the introduction of the cumulative voting system, which Choi had pushed for to dam the alliance’s advisable candidates from becoming a member of the board.
This transfer comes regardless of Choi’s aspect belatedly extending an olive department to the MBK alliance by proposing the beginning of discussions for a possible grand compromise.
On the identical day, the alliance filed a grievance with the Truthful Commerce Fee, accusing Korea Zinc, Choi and CEO Park Ki-deok, in addition to present and former board members of Solar Steel Company (SMC) of violating the Truthful Commerce Act. SMC is an entirely owned Australian subsidiary of Korea Zinc.
On the eve of the extraordinary shareholders’ assembly, Younger Poong Precision, managed by Choi, bought 10.33 % of Younger Poong shares to SMC. In so doing, Choi created a brand new cross-shareholding construction and successfully nullified Younger Poong’s voting rights — a 25.42 % stake — in Korea Zinc.
Underneath the Business Act, if firm A, both alone or by way of its subsidiary, holds 10 % or extra of firm B’s shares, the shares that B holds in A lose their voting rights. Choi’s aspect leveraged this authorized provision to neutralize Younger Poong’s affect.
The MBK-Younger Poong alliance holds 40.97 % of Korea Zinc’s shares, in comparison with 34.35 % held by Choi and his allies. Nevertheless, with Younger Poong’s stake being locked, the alliance’s efficient shareholding was diminished to round 15.55 %, ensuing of their defeat within the vote.
Because of this, solely the proposals put ahead by Choi’s aspect, together with the implementation of the cumulative voting system and a cap on the variety of administrators at 19, have been permitted within the shareholders’ assembly.

Kim Kwang-il, a companion at MBK Companions overseeing the Korea Zinc deal, speaks throughout a web based press convention, Jan. 24, criticizing Korea Zinc’s creation of a cross-shareholding construction forward of the extraordinary shareholders’ assembly. Screenshot from Zoom
MBK argued that Choi’s aspect unlawfully created a cross-shareholding construction inside Korea Zinc to defend his management of the corporate and that excluding Younger Poong’s voting rights was a transparent case of fraudulent conduct.
“The resolutions handed on the Korea Zinc extraordinary shareholders’ assembly have been based mostly on unlawful and unjust logic and must be canceled or nullified,” an MBK official mentioned. “Korea Zinc is a nationwide key business. The sequence of illegal actions recklessly carried out by Choi have to be corrected.”
The prevailing interpretation within the authorized neighborhood is that the restrictions on cross-shareholding voting rights below the Business Act apply solely to inventory firms the place shares might be issued and transferred.
The MBK alliance claimed that since SMC is a restricted legal responsibility firm and a overseas entity, such restrictions below home regulation don’t apply.
However, Choi’s aspect contended that SMC is a inventory firm with a share issuance specification and that the cross-shareholding rules apply no matter whether or not the corporate is home or overseas.
With either side set to face off once more in a proxy battle on the common shareholders’ assembly in March, the injunction ruling is predicted to have a decisive influence on the stability of energy throughout the zinc smelter.
If the court docket rejects the MBK alliance’s injunction request, Choi can be one step nearer to securing his management over Korea Zinc.
Nevertheless, if the injunction is granted, the resolutions from the Jan. 23 assembly can be nullified and MBK and Younger Poong’s voting rights can be totally restored. In such an occasion, the proxy battle will successfully restart from scratch, and the alliance, with voting rights nearing that of a majority, could be the clear favourite to win.